Skip to content
- Stablecoin supply rises since November 2024, but market impact remains limited with derivatives dominating.
- Without stablecoin flow into spot markets, high volatility will persist, making high-leverage trades risky.
- Stablecoin reserves shift to derivatives exchanges, causing price movements to be driven by derivatives trading.
Analytical tool CryptoQuant notes the increasing activity in the market of stablecoins. The circulation of the stablecoins has been on a gradual rise since November of 2024. Although, the increase in stablecoins has not affected the market to the extent as it is seen that the market remained largely dominated by derivatives more than spot markets.
Stablecoin Supply Trends
According to the analysis, the platform reveals that its trends have been rising steadily, but the general consequences for the market have not been particularly positive. In the total stablecoin supply, there has been an expansion, but the reserve has changed significantly. On spot exchanges, the stablecoin reserves have slightly decreased, while, on derivatives exchanges, they have increased significantly. This shift also explain that derivative trading is the major determinant of the price movements and market liquidity than the spot trading.
A huge portion of stablecoins sits in derivatives exchanges, but these funds are yet to transfer to the spot markets. Therefore, great fluctuation maintains to prevail in the market of cryptocurrency. This pattern implies a crisis of demand for spot trading more than a crisis of liquidity. Without flows into spot markets by stablecoins it is probabalistic that volatilites will persist in the short intervention horizon.
Liquidity Impact on Spot Markets
CryptoQuant also found that if the stablecoin volume continues to reside in the derivatives exchanges, it will be impossible to stabilize the spot markets. This warrants caution and preferential practice of refraining from high leveraged positions because the hazards are still high at this time of volatility.
This highlights the need to appreciate the exact areas in which liquidity exists and the impacts it can have on market dynamics. This means that for as long as supply remains stagnant in its circulation in the decentralized sites, people need to tread carefully when buying high-risk pegged coins during volatile trading. This is still an ongoing process and the effect that growing supply often has in the market is likely to change as the distribution process stabilizes.
Thus, the market shift towards more stablecoins is still inconclusive to the extent it have influenced the price stability, as well as the liquidity. As of now, derivatives markets take the center stage, so the further development of stables and their contribution to market turn is worth the attention of crypto traders and researchers.
